June 19, 2007 — Cash-flow shortages and what to do about the government’s $22 million in unpaid utility bills dominated discussion at the V.I. Water and Power Authority (WAPA) board meeting Monday.
The central government and independent agencies owe WAPA $14 million for electricity and $8 million for water, according to Nellon Bowry, interim executive director, and Maurice Sebastien, acting chief financial officer. They provided the information at WAPA's June governing board meeting on St. Thomas.
As of June 18, the Finance Department had the largest outstanding balance for a central-government agency, owing $4,087,274 for public streetlight service. Just behind in outstanding debt were Public Works, Education, Health, Human Resources and the V.I. Police Department.
For independent government-owned agencies, Juan F. Luis Hospital, with $4,055,689 outstanding, dwarfs the second-place debtor: Roy L. Schneider Hospital, which has a comparatively minuscule $580,917. The biggest government debtor with respect to water bills is the V.I. Housing Authority with $1,452,975, followed close behind by Juan F. Luis again, with $1,183,314. There is an ongoing dispute between WAPA and the V.I. Housing Authority over responsibility for Housing’s high water bill.
Even as he gave the figures, Sebastien qualified their accuracy.
"On May 31 the media got a copy of the financial report, with government receivables,” Sebastien said. “I get a call the very next day from a government office, telling me that is not the actual amount of outstanding debt. So I want to make it very clear that these figures are a snapshot in time. They don’t account for checks being in the mail, and the actual amount of debt can change.”
The $4 million in outstanding debt for Public Works goes back to a dispute on the responsibility of paying for streetlights, Bowry said. Presently, electricity for streetlights is funded by a district streetlight fund based on two percent of property taxes. However, when legislation was first passed transferring the responsibility for streetlights to WAPA, no funding came with the responsibility. The dispute concerns funding for the period between when the Legislature transferred responsibility and when the Legislature allocated two percent of property taxes to pay for streetlights.
Board members expressed concern that the present streetlight funding is not sufficient to maintain the streetlights and make needed improvements.
“I think the community needs to know what we cannot do without payment,” said board member Noel Loftus. “The cash shortage restricts the utility’s spending on maintenance and other essential matters expected of us.”
“Well, the money was appropriated,” said new board member Juanita Young. “They just haven’t been using it to pay WAPA.”
The board had agreed there would be no new electrical service to delinquent government agencies, Chairwoman Cheryl Boynes-Jackson said. If the outstanding balance remains, this would prevent electrical service being hooked up to Juan F. Luis’ new cardiac center when the time comes. The board agreed in principle to form a committee focused solely on collecting outstanding government debt, to renew efforts to discuss the matter with the directors of indebted agencies and to confer with Gov. John deJongh Jr.
Also constricting WAPA’s cash flow are unrecovered fuel expenses. The rate WAPA may charge customers for the fuel they use to generate power is set twice a year by the Public Services Commission. That surcharge is the levelized energy-adjustment clause, known to utility customers as the LEAC. When oil prices go higher than anticipated, WAPA must absorb the difference until the next time the LEAC is set, whereupon they will begin to recover a portion of the loss each month. Currently they have a temporary shortfall of more than $13 million. That brings WAPA’s total shortfall to more than $35 million.
“My favorite characterization of WAPA is we are revenue rich but cash poor,” Bowry said.
In other financial matters, Bowry said WAPA will close its bond sale on June 28 and continue to work on its hedging options. WAPA is issuing $57,585,000 in bonds. Most of the proceeds will be used to pay for the purchase and installation of a waste-heat recovery boiler on St. Croix. It will increase the overall efficiency of the power plant from 37 percent to 50 percent. WAPA spends more than $130 million every year for fuel, so that 13-percent improvement translates into annual savings of more than $16 million. The board has invited former Executive Director Bruno-Vega to attend the bond closing.
Plans to also refinance a portion of their 1998 series bonds (about $40 million) at a lower interest rate have been put on hold for now due to the recent spike in interest rates. Refinancing now for very minimal gains would effectively preclude refinancing again in the future, because the cost of refinancing twice would eat up the gains created by the lower interest rate. Should interest rates drop in the future, that refinancing plan will be revisited.
After last year’s high oil prices, WAPA entered into a trial oil-price hedging plan. Under the plan, a hedge fund agrees to pay the difference if oil prices rise above an agreed high-collar point. But if oil prices drop below the low-collar point, WAPA would pay what it saves to the fund. Sebastien said the collar’s high point is currently $83 a barrel and the low point $59 a barrel.
WAPA’s internal investigation into the tragic accidental death of Raymond Christian should be completed by Friday, Bowry said. The apprentice lineman died June 4. (See "Apprentice Lineman Fatally Electrocuted.")
“Our focus is to come up with lessons learned for the future,” Bowry said. “More than who did what where, we want to make sure nothing like this ever happens again.”
Bowry said he hopes never again to have to tell anyone’s family their son or daughter fell victim to such a tragedy. The federal Occupational Safety and Health Administration (OSHA) is carrying out an independent investigation as well, he said. Wednesday will be a day of mourning for WAPA when board members, managers and Christian’s co-workers will say their final goodbyes at his funeral in Frederiksted. The authority has received permission to fly the V.I. flags at WAPA facilities at half staff for that day.
Tuesday’s meeting was the first for Bowry since he took over after Alberto Bruno-Vega retired June 1.
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